|
|
The authors devise an operational definition of European public goods and lay out ways to fund and deliver them. Acknowledging that issues remain before such public goods could be launched at scale, the authors propose the upcoming review of the EU Multiannual Financial Framework as an opportunity to place them at the centre of policy debate.
European public goods (EPGs) allow the EU to pursue projects implemented at a centralised level by means of common financing. EPGs have been revived recently in the context of the green and digital transition (Fuest and Pisani-Ferry 2019). This renewed attention was prompted by the pandemic shock, which convinced the EU member states of the need to create a central fiscal tool, albeit of a temporary nature, in the form of NextGenerationEU (NGEU) and its main component, the Recovery and Resilience Facility (RRF). Many observers believe that the RRF should be transformed into a permanent instrument, thereby creating a European central fiscal capacity. However, despite its innovative scope, the RRF is characterised mainly by national use of EU financial resources (transfers and loans), as the European Council negotiations led to a reduction in the share of EPGs (Papaconstantinou 2020). Therefore, making it permanent would be politically controversial, as it could raise concerns that the EU is turning into a ‘transfers union’. This risk would be mitigated by focusing on the production of EPGs (Buti and Papacostantinou 2022, D’Apice and Pasimeni 2020).
EPGs are less politically contentious compared to other forms of central fiscal capacity for at least two reasons. First, EPGs weaken the juste retour (or net balance) narrative, according to which each EU country tends to subtract how much it contributed to the EU budget from how much it received back directly. Second, the production of EPGs would lessen the tensions between alleged ‘creditors’ and ‘debtors’ and the consequent risks of opportunistic behaviours linked to transfers to national budgets. From a policy perspective, EPGs could help deliver the ‘triple transition’ (green, digital, social) and promote the role of the EU in international markets, thus helping to reconcile European domestic and global agendas. Furthermore, EPGs can play an important role in tackling the economic and political fallout from the Russian invasion of Ukraine.
This column is part of a long-standing research stream on EPGs that has addressed their implications for the euro area policy mix (Buti and Messori 2021a, 2022a), the role of the EU in global governance (Buti and Messori 2021b, 2022b), and the future of NGEU (Buti and Messori 2023). Against this background, in the next two sections, we put forward an operational definition of EPGs and outline a preliminary classification of these goods. We then explain how EPGs could be delivered and financed...
more at CEPR